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Building Electrification: A Route to Net Zero?

Countries and cities worldwide are laying down plans to reach ambitious net-zero emissions targets. Both Toronto and Waterloo have outlined their goal to reduce city emissions to net-zero by 2050 as the realization sinks in that we cannot continue without action. Naturally when they look at putting policies in place to reach that goal, they need to understand what is going to have the greatest impact and first target those areas that are the biggest contributors to greenhouse gas (GHG) emissions.

In Toronto 55% of all GHG emissions can be attributed to buildings and 27% of emissions in Waterloo region came from workplaces. Building owners that recognize the importance of ESG in future performance have already started to prioritize zero-carbon technologies in their portfolios. Carbon emissions from buildings occur primarily through the heating of water and space and this is why many property owners are turning to building electrification to decarbonize their buildings.

What is building electrification?

Historically, most buildings have relied on the burning of fossil fuels to provide heat, air conditioning and hot water. Electrification is essentially replacing this equipment with electric equipment and thereby reducing or eliminating emissions altogether. According to a report from the American Council for an Energy Efficient Economy (ACEEE), simply replacing the gas burning heating systems in commercial buildings with heat pumps, could result in a reduction of around 44% in GHG emissions.

What’s involved in building electrification?

Unfortunately it isn’t as simple as a ‘like-for-like’ replacement of heating systems. The main technology available to building owners comes in the form of heat pumps and larger technology such as that needed for commercial buildings, is still very new to the North American market. There are many components to consider when considering electrification and there are experienced companies out there that can advise on what’s required and undertake a full audit. Some of the things they will audit and analyze are;

  • Current gas-burning equipment;

  • Right-sizing new equipment for the space which involves looking at where heating and hot water loads can be minimized;

  • Determining new electrical load and whether that’s possible with the current utility provider;

  • Outline options for new equipment - this is a complex area for commercial buildings and professionals and engineers will need to be employed to advise on the configurations needed according to heating load and water temperature, structural considerations due to the heavy nature of commercial equipment and provide input around the type of refrigerant that will be used given that these are under increasing scrutiny as a source of emissions themselves.

Benefits of building electrification

The most obvious benefit to electrifying commercial property is the immediate reduction in utility costs; electricity, particularly ‘clean’ electricity powered by wind and solar, is significantly cheaper than natural gas and that gap is likely to widen.

The cost of gas infrastructure for new buildings has imploded in recent years so the construction cost difference between gas-fueled buildings and clean energy buildings is lessening all the time.

Aside from the cost benefits of building electrification, there’s an argument for scrapping gas-fueled cooking appliances from residential homes due to growing concerns that they’re detrimental to human health and this extends to commercial property and public health too. According to GreenTech Media, researchers in the US found that gas stoves in homes produce levels of nitrogen dioxide and carbon monoxide that would fail outdoor pollution standards and that children living in these homes were up to 42% more susceptible to developing asthma. No doubt this research will lead to further studies on the impact of other gas-burning appliances on human health and air quality.

Another benefit for property owners could be the potential of fully-electrified, zero-carbon buildings to not only generate enough electricity to power themselves but to generate more than they need. Canada’s largest net-zero building, the Joyce Centre for Partnership and Innovation at Mohawk College in Hamilton actually produces more electricity than it uses and this is largely thanks to the use of a variable flow heat pump system. It’s early days for this technology but what’s to stop this abundance of clean energy being sold back to towns and municipalities as an additional income stream?

Joyce Centre at Mohawk College - Zero-Carbon Building

Federal support and regulation fueling push to building electrification

Electrification can be a bitter pill to swallow for building owners who may be dissuaded by high upfront costs and long payback times; like it or not however, we can’t get to zero emission targets without targeting the biggest culprits and commercial buildings are high on that list.

Building owners should be thinking strategically about bringing existing properties up-to-speed where it pays in the desired hold period. Even if that doesn’t stack up, careful consideration must be given to both the saleability of a non-electrified building in ten years’ time as the cost of ownership escalates alongside growing regulatory requirements and looking at the bigger picture; can you even do business in a world so increasingly at risk from climate change events?

Many investors already have an ESG focus, for others, at the very least they will need to keep up-to-date with new incentives coming forth from policymakers which encourage wider adoption of electric technologies and must leverage each and every opportunity to electrify their assets now to reduce costs later.

We’ve already begun to see the push from the federal government in budget 2022, in which they detailed plans to expand upon accelerated tax deductions for businesses that are investing in clean energy equipment such as air-source heat pumps and the fact that we’re hearing murmurs of all new commercial buildings having to dedicate space for electric vehicle (EV) charging in the near term, the future certainly does seem electrified.

Reach out to PCG for more information on ESG focused investments in the Greater Toronto and Waterloo regions.


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